Explosive growth.
That’s a simple, yet accurate way to describe the edtech market over the past decade.
Here’s the proof: The global edtech market kicked off in 2010 with just $500 Million in venture capital investment. Ten years later, it was 32 times higher ($16.1 Billion). Even 2020 investment levels in edtech were 2 times higher than the previous record set two years before that in 2018. It’s fair to say that edtech is much more than just a hot trend. Edtech has staying power.
From education software-as-a-service and corporate training to content and services, preK-12, and post-secondary learning--US edtech companies alone have a market capitalization of $71 billion (as of January 2020).
At the same time, it’s important to note that the sector is rife with disparities along lines of race and gender. Navigating such rough seas is a huge lift even for entrepreneurs coming to the table with lots of unearned privilege.
So what’s an education entrepreneur to do in such a context? How can aspiring entrepreneurs strike while the iron is hot and secure funding for their ideas? What helps an entrepreneur’s idea stand out amongst the crowd?
These are critical questions to be answered on your road to that fundraising meeting. To help with that, let’s quickly set the stage:
Investors will have checked out you and your product (usually online) well before your pitch presentation
Funders will pepper you with questions to test your knowledge of the edtech sector
VCs will ask other VCs about you before you even walk in the door
Potential investors will ask who else has invested in your product and who else you know in the sector
Most of all, they’ll want evidence of traction and proof of concept
Now that you have a sense of what that fundraising meeting will look like, let’s dive into how you can set yourself up for success well before that crucial juncture.
5 Keys To Getting Started With EdTech Fundraising
There’s just no golden ticket when it comes to edtech fundraising. Winning edtech entrepreneurs tend to boast a solid mix of innovative ideas, strong connections, and technical know-how. If you’re starting from scratch, there are a number of foundational ways you can position your entrepreneurial venture for fundraising success:
Know yourself as an education entrepreneur
Venture capitalists are famous for their love of the Socratic method.
What that means for entrepreneurs: Be ready to tell your story to different audiences and answer lots of tough questions.
Before every pitch meeting, think through the following key fundraising questions:
What problem are we solving?
What’s our unique value proposition?
Why is our team the right one to get the job done?
How do we know our solutions will work?
We can’t stress this enough. Our approach helps entrepreneurs answer this critical question before they walk into those investor meetings.
How will we engage and entice users?
What’s our plan to distribute our innovation?
While your mileage will vary from pitch meeting to pitch meeting, these questions form the basis of how you’ll be assessed by potential investors.
It’s also a good idea to think ahead about tailored questions individual investors will ask you based on their unique profiles.
Practice your answers in front of a mirror and with your team. It’ll make a difference come game time.
Be a good student: Study the edtech sector
Before you move into a new city or town, you’d most likely read the local news to get a feel for the place.
A similar approach applies to entering the edtech fundraising scene. Get a feel for what’s happening in the space.
Read the room.
Are you up on the latest disruptions to social-emotional learning and participatory research in edtech? (If not, check out the Hechinger Report.)
Have you explored the implications of emerging technologies like augmented reality (AR) and robotics on edtech? (If not, subscribe to TechCrunch and EdSurge.)
The time to learn up fast is now. Investors will, at the very least, want to make small talk about such market dynamics during your ten-minute coffee break between pitches.
Some ways you can educate yourself about the latest trends:
Join a book club with fellow K-12 edtech entrepreneurs
Subscribe to edtech newsletters chock full on insightful research
Set up an RSS feed for all things edtech
As you step into the role of edtech entrepreneur, remember that you need to transform yourself and that starts with changing the sorts of information you consume.
Most of all, this background knowledge will enrich your pitch and your ultimate product. Lean into market trends but don’t be beholden to them.
Know the players in the edtech fundraising landscape
Just like every high school has its cliques, the edtech fundraising scene has its own cast of characters.
You should be walking into pitch meetings knowing who is close with whom and who used to work at which firm.
For reasons we’ll discuss in just a moment below, this is critical to your success as an edtech fundraiser.
In short, word gets around. And it helps to know the pathways through which it passes.
Do your foundational research on VCs to determine if they would be a fit for you. Don’t waste your time (and theirs) chasing money that isn’t aligned.
Another layer to understanding the various players is being able to distinguish between the various types of investors. From angel investors and VC firms to foundations and governments, you need to know which buckets of funding from which you can feasibly pull.
Not only that, you’ll also need to make strategic decisions about which funding levers you pull and when (and why).
Walking into a pitch meeting knowing what (and whom) your potential investors have funded before is practically a superpower. Here’s what this looks like tactically:
Compile a 1-page background sheet on each investor
Talk about their recent investments in the meeting
Discuss their colleagues in the VC space (VCs trust their friends)
Leverage social proof and talk about institutions close to the hearts of your interviewers (like alma maters)
Understand and be able to share their investment thesis in the meeting
Throw their past wins back in their faces and be careful not to mention the painful losses.
Build relational power to streamline your pitch for investment
“Friendraising” is so much easier than fundraising.
In other words, asking people who already know and like you for investment is much more likely to lead to fundraising success than going in cold, even with the best ideas.
Like it or not, who you know still matters a great deal.
Don’t forget the old adage that “VCs fund A people, even if they have B ideas.” Now that doesn’t mean you should stop spending time on your actual innovations and become an edtech socialite.
It means that you should prioritize strengthening your professional profile while you hone your edtech products to secure further financial investment.
Develop an irresistible brand identity that entices investors
It’s difficult for your marketing to outpace your actual product.
That rings true in the long-run, but in the near-term there’s a lot that education entrepreneurs can do to build their brand while they build their products.
Plenty of companies have built tremendous brand equity among customers with limited products, whether those products are in short supply or even in development.
Remember this ironclad law of consumer (in this case, investor) behavior: People don’t buy your products, they buy how the product makes them feel about themselves.
The goal of any effective marketing strategy is to build excitement around a brand, not necessarily explain all products and features in detail.
Skilled education entrepreneurs know and act on this important point.
So when it comes to fundraising for edtech, rather than just saying “make sure your pitch deck is strong,” here’s how to treat your brand itself as a product while you build your actual edtech product:
Pitch Deck
Boil the pitch down to the essence of how your audience needs your product to improve their lives.
Make sure that the aesthetic is impressive. You will be judged on more than just the words but also the look and feel of the deck.
Make it clear you’ve done your homework on the market and that you’ve found the right niche to make your product viable.
Website
Think of this as your digital first impression. It’s likely the first place that an investor will land once they hear about your work.
Make sure that it clearly articulates what your edtech product is all about and how it’ll serve your focus communities.
It’s a good idea to add in some social proof in the form of current investors so that potential funders can feel confident that other investors believe in your product as well.
Blog + Podcast + Other Digital Assets:
You better believe that investors will dig through your content before they cut that check.
The first step is to make sure there’s great content there for them to look through--this is a great way to answer their tough questions ahead of time. Explain it in advance with strong content!
The second step is to keep a steady stream of high-quality content flowing as investors will come back to your site to understand your product and your thinking about the market.
It’s hard to overstate how important it is to pull together a strong brand as you build your edtech products. Potential investors will judge entrepreneurs on how these brand materials showcase their products.
Building a strong foundation for edtech fundraising
Here’s the big picture: Education entrepreneurs have a lot of pre-work to do before they even step into that pitch meeting.
In fact, just getting invited to that pitch meeting is conditional upon how you position yourself on the front-end:
Do you have your personal entrepreneur story down?
Have you studied the edtech space (and your niche within it)?
Are you familiar with the potential edtech investors you’re courting?
Have you built relationships with key players in edtech?
Are you coming to the pitch process with a strong brand presence?
The answer to each of these questions should be an unequivocal “Yes” followed by significant detail about why and how you answered in the affirmative.
The paradox here is that beginning the edtech fundraising journey is less about technical fundraising skills (such as building revenue forecasts into your pitch deck) and more about building the best possible foundation for winning over investors once you do get that far.
But getting to the table is a complex process that we’ve tried to simplify here.
The early stages of edtech fundraising are as much about the signal you put out into the world as they are about any specific fundraising prowess.
That’s the nuance that successful education entrepreneurs have discovered and acted upon.